BILL ANALYSIS
AB 1821
Page 1
Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1821 (Ma) - As Amended: March 25, 2010
Policy Committee: P.E.R. &
S.S.Vote: 4-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill raises the oldest and lowest level pre-retirement
death benefits in CalPERS' 1959 Survivor Benefit Program by
merging surplus assets and the participants in the two original
pools into the third level pool. Specifically, the bill:
1)Merges, beginning on July 1, 2011, the assets and liabilities
of the survivor benefit programs in the first level and second
level pools into the third level pool.
2)Increases the benefits for participants in the 1st and 2nd
benefit levels to those of the 3rd level.
3)Authorizes CalPERS to suspend the $2 monthly employee premium
if the CalPERS board determines that the combined pool
contains surplus funds.
FISCAL EFFECT
1)No direct costs to employers or employees of CalPERs
contracting agencies. Decrease in a projected actuarial
surplus in the survivor benefit program, due to the increased
benefits for survivors in the first two benefit levels.
However, the projected surplus for the combined pool would
remain above $58 million - and total assets of the merged pool
are expected to be more than three times needed to fund
projected benefits.
2)Administrative costs to CalPERs to merge the survivor benefit
pools are minor and absorbable.
AB 1821
Page 2
COMMENTS
1)Background . The 1959 Survivor Benefit was created in 1959 as a
substitute for Social Security for survivors of state and
school employees who die prior to retirement. The benefit is
paid for employees who are not included in Social Security and
who die while in active service prior to retirement. The
benefit is only paid when the employee dies due to non-work
related causes, as workers that die from employment related
causes are covered through other programs.
The benefits are set in statute and do not rise over time with
inflation. Instead, the state has created higher tiers of
benefits over the years. Currently there are five benefit
levels. As an example of the differences in benefit levels, a
surviving spouse with two children would receive $430 per
month under the first level benefit, $538 per month under the
second level benefit, $840 per month under the third level
benefit, and $1,500 per month under levels four and five. The
first two levels have a combined total of 13,000 participants
and have been closed to new employees since 1994. The third
level has 46,000 participants and has been closed since 2001
An actuarial valuation of the program showed that the first
two level pools have large surpluses - despite the recent
market downturn. In the case of the first level benefit,
projected assets in the pool are more than 10 times the amount
needed to cover projected payments.
2)Rationale . This bill is sponsored by CalPERS for the purpose
of using surpluses in the first and second level pools to
raise benefits to more realistic levels and to provide more
stability to the level 3 pool. Merging the pools and paying
the third-level survivor benefit would provide a needed
cost-of-living increase to participants in the first and
second level pools, and provide added stability to the
combined pool. CalPERS also notes that, under law, surplus
assets in the Survivor Benefit program can only be used for
the benefit of its members.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081